Recurring Payments: How They Work and Tips for Success

At some point in our lives, most of us have signed up for one subscription or another. 

Whether a gym membership, a weekly or monthly newspaper, and magazine, utility bills, paying your phone bill every month, and interestingly, you can also sign up for a car service or even have shaving kits delivered to your doorstep every month these days. The list is nearly endless.

But what makes such subscriptions so popular?

Sure, they offer convenience. A customer no longer needs to enter their payment details every time they want a product or service delivered. They can simply sign up for a recurring payment and get on with their lives.

But what are recurring payments, how do they work, and how can you turn a customer into a subscriber? We take a closer look.

What Are Recurring Payments?

Simply put, recurring payments, also known as recurring billing, are just what the name implies. These are payments, debited from a customer’s account during a specific billing cycle or payment cycle, such as monthly or annually.

These payments are automatically deducted from a customer’s account for the delivery of goods or services and are based on a predetermined schedule.

Types of Recurring Payments

There are two main types of recurring payments – fixed recurring payments and variable recurring payments. 

Under the fixed recurring payment form, the customer’s bank account is charged the same amount every time on a recurring basis. The most popular example of when fixed recurring payments are used is for subscription payments where the customer’s usage is constant every month. 

In this case of recurring charges, the customer subscribes to a product or service with the intention of using the same thing over and over again, without any changes. Examples include magazine subscriptions or streaming services. 

On the other hand, variable recurring payments are not fixed but based on the usage of the consumer. In this case, the charged amount is different every month.

For example, imagine that a customer agrees to sign up for a software-as-a-service (SaaS) subscription. Usually, such offers come with pay-as-you-go pricing models. The first payment may be for a single feature, while a few months after the subscription the customer may agree to use all the features of the solution, naturally leading to changes in the billing. 

How Do Recurring Payments Work?

Whether a Microsoft Office payment for a set period of time, a Netflix subscription so that you can watch your favourite shows, or a creativity box that arrives at your doorstep for your kids, recurring payments use the same method irrespective of what the product or service being delivered is.

Essentially, the customer chooses the duration of the payment – for example, monthly, quarterly or annually – enters their account details onto the payment page, selects the right payment method, and hey presto!

Their card details are saved so that the merchant can bill them regularly while offering their products or services on a regular basis, too.

The payment processing takes place via a secure payment gateway that ensures the customer’s payment information is protected. 

What Is a Recurring Revenue Business Model?

Although it’s not ideal for all business types, a recurring revenue business model is gaining significant popularity. This is because of all the benefits it offers.

In short, a recurring revenue business model is one that offers customers a specific product or service regularly, while charging your customers periodically for their service with automatic payments and not on a once-off basis. This model is very useful to ecommerce businesses and companies requesting recurring online payments. 

Through this approach, you are able to turn a loyal customer into a subscriber for your services, which means easier forecasting for expected income. At the same time this business model provides your customers with an automated and convenient payment experience by facilitating multiple transactions or breaking down a large upfront cost into smaller expenses.

How Can Recurring Payments Help Your Business?

Recurring card payments are not only convenient for consumers. They can offer a lot of advantages for any business, no matter its size.

Here are a few main benefits of recurring payments: 

• Cash flow improvements: collecting payments with a prearranged schedule means that you can stabilise your cash flow. This also inevitably leads to the ability to easily and accurately predict how much revenue you expect to generate on a monthly, even yearly basis.
• Prevention of late payments: by relying on recurring payments, you can also minimise late payments. Rather than chasing customers to ensure they pay you on time and manually sending payment links, you can simply count on your recurring payment system. 
• Automation: recurring payments also enable you to automate the entire payment process, ultimately leading to time savings. This eliminates all risks and challenges associated with one-off payments and can dramatically reduce collection costs.

By setting up routine charge repeatedly, companies and customers can take advantage of easier and more reliable financial transactions. 

However, in order to take advantage of all of these benefits of recurring payments, it’s key to ensure that you can prevent failed transactions. In most cases, payment failures are a result of insufficient funds. To manage payments effectively, make sure that you have a process in place to notify consumers of upcoming payments.

How to Turn a Customer Into a Subscriber

There are several ways of turning your customers into subscribers to boost your customer retention and offer a better customer experience. 

Here are 7 ideas you might consider.

1. Improve Your Online Store

Optimising your online shop means taking the customer journey into consideration. All this starts with your landing or home page and ends with the checkout page.

Consider offering your customers a checkbox to sign up for regular news and updates, a white paper, news of newly published articles on your site, or more.

You’d also need to make sure your online store offers the subscription model while being a user-friendly website with a brilliant design and simplicity of usage.

2. Offer Your Customers Exclusive Deals

Another way of turning a customer into a subscriber is to leverage your email marketing resources and use them to promote coupons or discounts for upcoming sales to your customers. 

Unique content or limited exclusive access can also help one-time buyers feel more special to have received a deal so you can convert them more easily to subscribers. 

3. Add Buttons to Your Social Media Channels

These buttons can be sign-up buttons where they agree to receive communications from your business. This way, you’ll ensure that your loyal customers stay that way as you offer them value in return.

You can also include buttons to your social media profiles throughout your marketing communications so you can earn the trust of new consumers with the help of digital content. 

4. Make Your Customers’ Journey a Personalised One

By ensuring that your customers feel a personal connection with your business, you’ll go a long way to ensure that they turn into subscribers, as they won’t be able to get that sense of value elsewhere. 

Make them feel special and valued. Your content is crucial for this step.

5. Start With List Segmentation

You will also want to segment your lists to ensure you target the right customers with the right offers.

Choose a target group of customers you believe can be incentivised to subscribe and present them with a special deal customised to their needs. 

6. Offer Benefits Rather Than Features

The features are nice, but the benefits are even nicer. 

By emphasising which pain points your product or service will resolve, you’ll ensure your customer is on your side, willing to try what you’re offering them.

7. Provide Social Proof

As always, social proof or the good old-fashioned word-of-mouth marketing are crucial. 

Your customers need to see other happy customers who’ve signed up for your offering in order to be convinced that your product or service is right for them. Showcasing testimonials of satisfied customers is one way of doing this.

How to Start Accepting Payments With Subscriptions

The back-end of accepting payments with subscriptions can be time-consuming and expensive. However, if you are thinking of implementing a recurring payments business model, then this is a must.

You will also need to consider the fact that your customers’ credit cards will expire at some point, that they may not have sufficient funds in their accounts, and these are all points subscription businesses need to consider.

So how can you accept recurring payments?

In general, here are the steps to signing up for recurring payments with myPOS:

1. Create your free merchant account
2. Create your Checkout store
3. You choose the method of integration in terms of the platform which you use for your online shop (PrestaShop, Woocommerce, OpenCart, etc.) and you then choose the programming language in which your site or application is written (such as PHP, Java, iOS, etc.). Alternatively, if you use another programming language, you can rewrite your commands using our API. 

This is where the specifics for creating recurring payments begin. 

We would suggest that you get in touch with our team so you can indicate that you would like to use tokenisation of cards and recurring payments. 

Your integration will then be examined by the Risk team and if they don’t have any further questions, your Checkout store is then verified and you may use tokenisation of cards. If there are any difficulties with the technical part of the integration, the Integrations team is available to assist you.

Conclusion

While setting up recurring payments for your customers may not be the easiest action to take, it is certainly the road many businesses are taking these days to ensure customer loyalty and better revenue streams.

Of course, you need to ensure that when you provide your product or service that you do this well so that you don’t leave customers disappointed and looking to cancel their subscription.

In addition, your recurring payment business model needs to be flawless so that you cater to all possibilities that may crop up in the course of payments acceptance. However, by getting this part right, you will up your sales and boost customer satisfaction.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog in general should not be interpreted as a legal, monetary, tax or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.